In India, before 2004, government employees were given pensions under the Old Pension Scheme (OPS). Under this, a fixed pension was given for life after retirement. 50% of the last salary was given as a pension. Dearness Allowance (DA) was linked, due to which the pension kept increasing from time to time. The entire funding was done by the government; there was no contribution from the employee. But NPS was implemented on 1 April 2004, due to which this system was closed for newly recruited government employees.
Restoration of the Old Pension Scheme (OPS) has become an important social and economic issue in India. It is not only a matter of concern for government employees but also for the country’s financial policy and social security. In 2004, the Old Pension Scheme was abolished and the New Pension Scheme (NPS) was implemented, but in the last few years, there has been a widespread movement and political debate among employees regarding the restoration of OPS.
What was the Old Pension Scheme (OPS)?
Imagine getting a fixed income every month even after your job is over, like a magical treasure that never gets empty! This was OPS—a defined benefit pension scheme in which government employees received 50% of their last salary as pension after retirement. Dearness Allowance (DA) was also added to this, due to which the pension kept increasing from time to time. Under this scheme, the government gave a full guarantee of pension, and the employee did not have to make any contribution.
New Pension Scheme (NPS) and Controversy
In 2004, the central government abolished OPS and implemented NPS, which is a defined contribution scheme. In this, employees have to invest a certain part of their salary in a pension fund, which has to depend on market-based returns. Now imagine that your pension is floating on the waves of the stock market—sometimes up, sometimes down! This is the reason why there is a feeling of insecurity among employees about NPS, because there is no guaranteed pension in it.
Why is the demand for OPS restoration increasing?
Financial insecurity: The pension amount in NPS depends on market performance, which does not provide permanent and fixed income to retired employees. The pension in OPS used to increase with the dearness allowance, whereas NPS does not have this benefit. States like Rajasthan, Chhattisgarh, Punjab, Jharkhand, and Himachal Pradesh have announced the implementation of OPS. Lakhs of government employees are on strike and protesting, increasing the pressure on the government. OPS is considered an essential means for financial stability in old age. Many retired employees under NPS are struggling to meet their expenses.
International perspective: pension systems in other countries
Different models have been adopted for the pension system in many countries of the world. Some countries have continued schemes like OPS for government employees, while other countries have adopted a private investment-based system. Under the Social Security System in the US, government and private employees get a fixed pension after retirement. However, government contribution is limited in this, and personal investment is also necessary. A state pension scheme is in place in Britain, in which the government ensures a minimum pension, but private schemes are encouraged for additional pension.
Germany has a strong public pension system, where both employees and employers make mandatory contributions, resulting in a guaranteed pension. France also has a defined benefit pension system, where the government plays a major role and employees are provided with a permanent pension.
A superannuation fund system is in place here, in which both the employee and the employer make regular investments, and after retirement this amount is given in the form of a pension.
Why do MPs and MLAs get pensions?
An important question also arises: if the pension of government employees has been abolished, then why are MPs and MLAs still given pensions? Do MPs and MLAs make policy decisions during their tenure, for which they get special privileges? In many states, MLAs get lifelong pensions after one term, which is different from the rules for general government employees. Many former MPs and MLAs have already been working in government services, and they get double pensions. Many employee organizations argue that when the pension of government employees has been abolished, then public representatives should also be kept in the same category. The burden of pension of MPs and MLAs on the government treasury is increasing, due to which the demand for abolishing it is increasing.
Potential benefits, financial impact, and challenges of OPS restoration
Restoration of OPS may increase the government’s financial burden. The government will have to allocate a large part of its budget for pension payments, which may affect other development schemes. Some economists believe that implementing OPS may lead to long-term economic imbalances. A permanent pension scheme will provide security to employees, and they will be assured about their future. People’s inclination towards government jobs will increase, due to which qualified and talented people will join the administrative services. When retired employees get assured income, they will maintain their purchasing power, which will maintain stability in the market. OPS allows employees to live with dignity in old age.
The restoration of old pensions is not just an employee welfare policy but a broader social and economic issue. The government has to adopt a balanced approach and formulate a policy that ensures the economic security of employees and, at the same time, maintains the financial balance of the government. The future of OPS restoration will depend on how the government resolves this issue and whether a middle path is possible.
